Sales of all TVs in retail stores increased 15.7 percent to $18.2 billion while unit sales remained flat. E-commerce sales jumped 40 percent both in units and dollars to two million and $1.8 billion, respectively. However, online revenue only accounted for 8.7 percent of total TV sales, and units were only 6.4 percent of all TVs sold.

Consumers spent more money on electronics in 2006, but the rate of increase is slowing. That's the good and bad news from the latest retail tracking numbers from NPD Group. Data shows U.S. consumer technology sales increased 3.6 percent to $111 billion down from the 7.2 percent growth experienced in 2005.

More consumers shopped in the stores than online in 2006, with brick and mortar revenue increasing by 4.6 percent to $85.8 billion, while e-commerce experienced only 0.5 percent growth to $25.2 billion. Television, notebook computer, and MP3 player sales produced strong gains in the overall market, but were off-set by declining revenue from DVD players, home theater, desktop computers, and printers.

Household income was a major contributing factor to the rise in 2006 consumer technology sales. Sales to high-income consumers, those with incomes over $75,000, increased 5.7 percent and accounted for 43 percent of consumer technology revenue in 2006. The most significant growth came from consumers with incomes greater than $150,000, where we saw an increase of 7.1 percent to $10.3 billion.

Sales of all TVs in retail stores increased 15.7 percent to $18.2 billion while unit sales remained flat. E-commerce sales jumped 40 percent both in units and dollars to two million and $1.8 billion, respectively. However, online revenue only accounted for 8.7 percent of total TV sales, and units were only 6.4 percent of all TVs sold.

“While we saw good growth in online TV purchases the e-commerce channel is just too small to have a material impact on the market right now, but that is likely to change,” said Stephen Baker, vice president of industry analysis, The NPD Group. “The average selling prices of TVs sold at retail have increased dramatically over the past few years. High-income early-adopters primarily purchase TVs online and pay early adopter prices, so as in-store pricing climbs and retail store consumers move towards more expensive TVs we expect to see in-store pricing and online pricing become more in line with each other. As large screen TV prices become more affordable we expect to see online TV sales grow, as the mass audience which, to date, has been much more reluctant to purchase online begins to broaden its channel preferences.”

Retail sales were the principal driver for the PC market as well. Two-thirds of the $54 billion in IT product revenue came from retail, making it the third straight year that retail sales have outpaced e-commerce. Dell’s well publicized challenges have resulted in a major slowdown in consumer purchasing of PCs online. Just four years ago 70 percent of desktops were purchased at retail and only 33 percent of notebooks were sold at retail. In 2006 only 52 percent of desktops were bought in a store and 63 percent of notebooks at retail. The sharp growth of notebook PCs, combined with the flat sales of desktops have altered the mix of purchases both online and in stores.

MP3 players were a big contributor to overall 2006 sales, and consumers continued to purchase the players in the stores, due in part to Apple’s retail store strategy which drives consumers into a physical environment. Sales of MP3 players increased 23 percent to over $6 billion. Nearly 78 percent of both unit and dollar volume came from retail sales, an increase of five percentage points from 2005.

“E-commerce is growing, but slower than retail,” said Baker. “As some of these structural changes evolve we expect to see online sales increase, however, for now, consumers continue to prefer the retail experience when they purchase technology.”